What’s in your (digital) wallet?

This blog is based on the report Mobile Payments in the U.S. View the abstract and table of contents here.

Aug. 10 - Take a peek at your wallet or purse and what do you see? A little cash? A driver’s license? Employee ID and insurance cards? Some lint? And, of course, a nice mix of payment cards?

For a card issuer, it all comes down to where their card stands in your wallet: is it your primary card, the one that sits at the top of your wallet-the one you grab the most when paying? For many issuers, that’s the catbird seat. You don’t have to be first to be a winner though, especially if you are a private label card issuer with hopes of driving sales to a specific merchant, where third place isn’t just a ribbon to toss in a drawer; or even a cobrand card issuer, where second can feel downright wonderful.

Even if a wallet can hold seven or eight cards, some of them can become out of sight, out of mind, hidden beneath the insurance card, never to be used again. A sad day indeed for that card. Meanwhile, mini-wallets today hold just two or three cards-giving users reason to bring along only those cards that make the first cut.

In theory, digital wallets promise a bigger wallet-one that can hold all of your cards, including loyalty and gifts cards (the ones we otherwise so easily lose-they never even get into that old-school leather wallet!). This is a boon for consumers, who now can actually manage-and manage not to lose-all of their cards-using them when and where they see fit. And it means all cards get a place in the wallet, a boon for the has-beens and the forgotten.

But it doesn’t change the battle for the top spots. And by introducing ACH debit into the mix, some digital wallets may actually give up a spot to what is essentially a check that card issuers and networks make no money on. In these cases, the war for wallet share intensifies.

Cause for concern

But despite having access to all of that virtual real estate, mobile POS payers may not be using it, according to Packaged Facts December 2015 survey results:

• Some 48% of adult smartphone users who have used their phone to make a payment at the point of sale in the past 12 months say that they carry fewer cards than they used to carry a result of using mobile payments.
•  And the tendency to carry fewer cards to make payments is higher among Millennials, already a credit card usage trouble spot.

Cards are getting winnowed out. Not good, unless you’re near the top of the wallet.

This finding opens up a world of follow-up questions, among them: 

• Instead of loading all of their cards, are mobile POS payers just loading the ones they really need?
•  Are they defaulting to the card originally uploaded as a part of a corresponding user account (in Apple Pay, for example, do they just use the card originally entered in iTunes)?
• How do credit card rewards/points factor into using credit cards in digital wallets?
• Could merchants tie rewards to ACH debit?

Packaged Facts’ Mobile Payments in the U.S. wades further into this issue.

            -- By David Morris, market research analyst